Edgar Filing: GRIFFON CORP

10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q



ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2016



o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 1-06620

GRIFFON CORPORATION

(Exact name of registrant as specified in its charter)



DELAWARE		11-1893410
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

712 Fifth Ave, 18th Floor, New York, New York		10019
(Address of principal executive offices)		(Zip Code)

(212) 957-5000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ý Yes o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ý Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):



Large accelerated filer o	Accelerated filer	ý
Non-accelerated filer o	Smaller reporting company	o
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes ý No

The number of shares of common stock outstanding at March 31, 2016 was 46,594,741.

Griffon Corporation and Subsidiaries

Contents



	Page
PART I - FINANCIAL INFORMATION

Item 1 – Financial Statements

Condensed Consolidated Balance Sheets at March 31, 2016 (unaudited) and September 30, 2015	1

Condensed Consolidated Statement of Shareholders’ Equity for the Six Months Ended March 31, 2016 (unaudited)	2

Condensed Consolidated Statements of Operations and Comprehensive Income for the Three and Six Months Ended March 31, 2016 and 2015 (unaudited)	3

Condensed Consolidated Statements of Cash Flows for the Six Months Ended March 31, 2016 and 2015 (unaudited)	4

Notes to Condensed Consolidated Financial Statements (unaudited)	5

Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations	33

Item 3 - Quantitative and Qualitative Disclosures about Market Risk	45

Item 4 - Controls & Procedures	46

PART II – OTHER INFORMATION

Item 1 – Legal Proceedings	47

Item 1A – Risk Factors	47

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds	47

Item 3 – Defaults Upon Senior Securities	47

Item 4 – Mine Safety Disclosures	47

Item 5 – Other Information	47

Item 6 – Exhibits	48

Signatures	49

Exhibit Index	50

Table of Contents

Part I – Financial Information

Item 1 – Financial Statements

GRIFFON CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)



	(Unaudited)
	March 31, 2016		September 30, 2015
CURRENT ASSETS
Cash and equivalents	$	54,282	$	52,001
Accounts receivable, net of allowances of $6,311 and $5,342	261,161		218,755
Contract costs and recognized income not yet billed, net of progress payments of $15,273 and $16,467	108,480		103,895
Inventories, net	311,567		325,809
Prepaid and other current assets	53,022		55,086
Assets of discontinued operations	1,325		1,316
Total Current Assets	789,837		756,862
PROPERTY, PLANT AND EQUIPMENT, net	386,109		379,972
GOODWILL	360,094		356,241
INTANGIBLE ASSETS, net	214,733		213,837
OTHER ASSETS	25,482		22,346
ASSETS OF DISCONTINUED OPERATIONS	2,259		2,175
Total Assets	$	1,778,514	$	1,731,433

CURRENT LIABILITIES
Notes payable and current portion of long-term debt	$	19,217	$	16,593
Accounts payable	161,737		199,811
Accrued liabilities	98,889		104,997
Liabilities of discontinued operations	1,924		2,229
Total Current Liabilities	281,767		323,630
LONG-TERM DEBT, net	922,563		826,976
OTHER LIABILITIES	145,583		146,923
LIABILITIES OF DISCONTINUED OPERATIONS	3,220		3,379
Total Liabilities	1,353,133		1,300,908
COMMITMENTS AND CONTINGENCIES - See Note 18
SHAREHOLDERS’ EQUITY
Total Shareholders’ Equity	425,381		430,525
Total Liabilities and Shareholders’ Equity	$	1,778,514	$	1,731,433

The accompanying notes to condensed consolidated financial statements are an integral part of these statements.

Table of Contents

GRIFFON CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

(Unaudited)



	COMMON STOCK			CAPITAL IN EXCESS OF PAR VALUE			RETAINED EARNINGS			TREASURY SHARES				ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)			DEFERRED COMPENSATION
(in thousands)	SHARES	PAR VALUE		CAPITAL IN EXCESS OF PAR VALUE			RETAINED EARNINGS			SHARES	COST			ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)			DEFERRED COMPENSATION			Total
Balance at September 30, 2015	79,080	$	19,770	$	518,485		$	454,548		30,737	$	(436,559	)	$	(91,188	)	$	(34,531	)	$	430,525
Net income	—	—		—			14,691			—	—			—			—			14,691
Dividend	—	—		—			(4,508		)	—	—			—			—			(4,508		)
Tax effect from exercise/vesting of equity awards, net	—	—		2,291			—			—	—			—			—			2,291
Amortization of deferred compensation	—	—		—			—			—	—			—			1,400			1,400
Common stock acquired	—	—		—			—			2,138	(33,640		)	—			—			(33,640		)
Equity awards granted, net	990	247		(247		)	—			—	—			—			—			—
ESOP allocation of common stock	—	—		625			—			—	—			—			—			625
Stock-based compensation	—	—		5,555			—			—	—			—			—			5,555
Other comprehensive income, net of tax	—	—		—			—			—	—			8,442			—			8,442
Balance at March 31, 2016	80,070	$	20,017	$	526,709		$	464,731		32,875	$	(470,199	)	$	(82,746	)	$	(33,131	)	$	425,381

The accompanying notes to condensed consolidated financial statements are an integral part of these statements.

Table of Contents

GRIFFON CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(in thousands, except per share data)

(Unaudited)



	Three Months Ended March 31,						Six Months Ended March 31,
	2016			2015			2016			2015
Revenue	$	500,107		$	500,020		$	994,256		$	1,002,180
Cost of goods and services	385,950			385,645			763,994			769,816
Gross profit	114,157			114,375			230,262			232,364
Selling, general and administrative expenses	91,586			93,566			182,885			187,462
Income from operations	22,571			20,809			47,377			44,902
Other income (expense)
Interest expense	(12,392		)	(12,012		)	(24,415		)	(23,766		)
Interest income	44			155			55			272
Other, net	(385		)	(757		)	170			(1,208		)
Total other expense, net	(12,733		)	(12,614		)	(24,190		)	(24,702		)
Income before taxes	9,838			8,195			23,187			20,200
Provision for income taxes	3,743			3,073			8,496			7,607
Net income	$	6,095		$	5,122		$	14,691		$	12,593
Basic income per common share	$	0.15		$	0.11		$	0.35		$	0.27
Weighted-average shares outstanding	41,426			45,349			41,697			45,829
Diluted income per common share	$	0.14		$	0.11		$	0.33		$	0.26
Weighted-average shares outstanding	43,891			47,669			44,727			47,682
Dividends paid per common share	$	0.05		$	0.04		$	0.10		$	0.08
Net income	$	6,095		$	5,122		$	14,691		$	12,593
Other comprehensive income (loss), net of taxes:
Foreign currency translation adjustments	13,683			(30,384		)	10,334			(45,884		)
Pension and other post retirement plans	386			353			772			706
Change in cash flow hedges	(1,649		)	(80		)	(2,664		)	(154		)
Change in available-for-sale securities	—			92			—			(870		)
Total other comprehensive income (loss), net of taxes	12,420			(30,019		)	8,442			(46,202		)
Comprehensive income (loss), net	$	18,515		$	(24,897	)	$	23,133		$	(33,609	)

The accompanying notes to condensed consolidated financial statements are an integral part of these statements.

Table of Contents

GRIFFON CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)



	Six Months Ended March 31,
	2016			2015
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	14,691		$	12,593
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization	34,202			34,453
Stock-based compensation	5,555			5,372
Provision for losses on accounts receivable	(13		)	242
Amortization of debt discounts and issuance costs	3,384			3,265
Deferred income taxes	1,537			1,282
Gain on sale of assets and investments	(255		)	(315		)
Change in assets and liabilities, net of assets and liabilities acquired:
Increase in accounts receivable and contract costs and recognized income not yet billed	(43,751		)	(23,424		)
Decrease (increase) in inventories	17,617			(39,252		)
Decrease in prepaid and other assets	2,220			754
Decrease in accounts payable, accrued liabilities and income taxes payable	(42,632		)	(40,244		)
Other changes, net	2,037			2,223
Net cash used in operating activities	(5,408		)	(43,051		)
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, plant and equipment	(45,952		)	(39,713		)
Acquired businesses, net of cash acquired	(4,470		)	—
Proceeds from sale of assets	868			177
Investment sales	715			8,891
Net cash used in investing activities	(48,839		)	(30,645		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock	—			285
Dividends paid	(4,508		)	(3,911		)
Purchase of shares for treasury	(33,640		)	(37,577		)
Proceeds from long-term debt	139,604			99,556
Payments of long-term debt	(46,323		)	(29,425		)
Change in short-term borrowings	(191		)	(572		)
Financing costs	(1,120		)	(590		)
Tax benefit from exercise/vesting of equity awards, net	2,291			345
Other, net	208			95
Net cash provided by financing activities	56,321			28,206
CASH FLOWS FROM DISCONTINUED OPERATIONS:
Net cash used in operating activities	(578		)	(545		)
Net cash used in discontinued operations	(578		)	(545		)
Effect of exchange rate changes on cash and equivalents	785			(3,768		)
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS	2,281			(49,803		)
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD	52,001			92,405
CASH AND EQUIVALENTS AT END OF PERIOD	$	54,282		$	42,602

The accompanying notes to condensed consolidated financial statements are an integral part of these statements.

Table of Contents

GRIFFON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(US dollars and non US currencies in thousands, except per share data)

(Unaudited)

(Unless otherwise indicated, references to years or year-end refer to Griffon’s fiscal period ending September 30)

NOTE 1 – DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

About Griffon Corporation

Griffon Corporation (the “Company” or “Griffon”) is a diversified management and holding company that conducts business through wholly-owned subsidiaries. Griffon oversees the operations of its subsidiaries, allocates resources among them and manages their capital structures. Griffon provides direction and assistance to its subsidiaries in connection with acquisition and growth opportunities as well as in connection with divestitures. In order to further diversify, Griffon also seeks out, evaluates and, when appropriate, will acquire additional businesses that offer potentially attractive returns on capital.

Griffon currently conducts its operations through three reportable segments:


•	Home & Building Products (“HBP”) consists of two companies, The AMES Companies, Inc. (“AMES”) and Clopay Building Products Company, Inc. (“CBP”):


-	AMES is a global provider of non-powered landscaping products for homeowners and professionals.


-	CBP is a leading manufacturer and marketer of residential, commercial and industrial garage doors to professional dealers and major home center retail chains.


•	Telephonics Corporation (“Telephonics”) designs, develops and manufactures high-technology integrated information, communication and sensor system solutions for military and commercial markets worldwide.


•	Clopay Plastic Products Company, Inc. (“PPC”) is an international leader in the development and production of embossed, laminated and printed specialty plastic films used in a variety of hygienic, health-care and industrial applications.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, these financial statements do not include all the information and footnotes required by U.S. GAAP for complete financial statements. As such, they should be read with reference to Griffon’s Annual Report on Form 10-K for the year ended September 30, 2015, which provides a more complete explanation of Griffon’s accounting policies, financial position, operating results, business properties and other matters. In the opinion of management, these financial statements reflect all adjustments considered necessary for a fair statement of interim results. Griffon’s HBP operations are seasonal; for this and other reasons, the financial results of the Company for any interim period are not necessarily indicative of the results for the full year.

The condensed consolidated balance sheet information at September 30, 2015 was derived from the audited financial statements included in Griffon’s Annual Report on Form 10-K for the year ended September 30, 2015.

The consolidated financial statements include the accounts of Griffon and all subsidiaries. Intercompany accounts and transactions have been eliminated on consolidation.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting periods. These estimates may be adjusted due to changes in economic, industry or customer financial conditions, as well as changes in technology or demand. Significant estimates include allowances for doubtful accounts receivable and returns, net realizable value of inventories, restructuring reserves, valuation of goodwill and intangible assets, percentage of completion method of accounting, pension assumptions, useful lives associated with depreciation and amortization of intangible and fixed assets, warranty reserves, sales incentive accruals, stock based compensation assumptions, income taxes and tax valuation reserves, environmental reserves, legal reserves, insurance reserves

and the valuation of assets and liabilities of discontinued operations, acquisition assumptions used and the accompanying disclosures. These estimates are based on management’s best knowledge of current events and actions Griffon may undertake in the future. Actual results may ultimately differ from these estimates.

Certain amounts in the prior year have been reclassified to conform to current year presentation.

NOTE 2 – FAIR VALUE MEASUREMENTS

The carrying values of cash and equivalents, accounts receivable, accounts and notes payable, and revolving credit and variable interest rate debt approximate fair value due to either the short-term nature of such instruments or the fact that the interest rate of the revolving credit and variable rate debt is based upon current market rates.

Applicable accounting guidance establishes a fair value hierarchy requiring the Company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the hierarchy is based on the lowest level of input that is significant to the fair value measurement. The accounting guidance establishes three levels of inputs that may be used to measure fair value, as follows:


•	Level 1 inputs are measured and recorded at fair value based upon quoted prices in active markets for identical assets.

•

Level 2 inputs include inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of assets or liabilities.


•	Level 3 inputs are unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

The fair values of Griffon’s 2022 senior notes and 2017 4% convertible notes approximated $588,000 and $115,375, respectively, on March 31, 2016. Fair values were based upon quoted market prices (level 1 inputs).

Insurance contracts with values of $2,935 at March 31, 2016, are measured and recorded at fair value based upon quoted prices in active markets for similar assets (level 2 inputs) and are included in Prepaid and other current assets on the Consolidated Balance Sheets.

Items Measured at Fair Value on a Recurring Basis

At March 31, 2016, trading securities, measured at fair value based on quoted prices in active markets for similar assets (level 2 inputs), with a fair value of $1,200 ($1,000 cost basis) were included in Prepaid and other current assets on the Consolidated Balance Sheets. During the first quarter of 2016, the Company settled trading securities with proceeds totaling $715 and recognized a loss of $13 in Other income (expense). During the second quarter of the prior year, the Company settled all outstanding available-for-sale securities with proceeds totaling $8,891 and recognized a gain of $489 in Other income (expense) and, accordingly, a gain of $870, net of tax, on available-for-sale securities was reclassified out of Accumulated other comprehensive income (loss) ("AOCI"). Realized and unrealized gains and losses on trading securities, and realized gains and losses on available-for-sale securities are included in Other income in the Consolidated Statements of Operations and Comprehensive Income (Loss).

In the normal course of business, Griffon’s operations are exposed to the effect of changes in foreign currency exchange rates. To manage these risks, Griffon may enter into various derivative contracts such as foreign currency exchange contracts, including forwards and options. During 2016, Griffon entered into several such contracts in order to lock into a foreign currency rate for planned settlements of trade and inter-company liabilities payable in US dollars.

At March 31, 2016, Griffon had $33,000 of Australian dollar contracts at a weighted average rate of $1.30, which qualified for hedge accounting. These hedges were all deemed effective as cash flow hedges with gains and losses related to changes in fair value deferred and recorded in AOCI and Prepaid and other current assets, or Accrued liabilities, until settlement. Upon settlement,

gains and losses are recognized in the Consolidated Statements of Operations and Comprehensive Income (Loss) in Cost of goods and services ("COGS"). AOCI included deferred losses of $2,714 ($1,981, net of tax) at March 31, 2016 and gains of $181 and $585 were recorded in COGS during the quarter and six months ended March 31, 2016, respectively, for all settled contracts. All contracts expire in 28 to 270 days.

At March 31, 2016, Griffon had $4,615 of Canadian dollar contracts at a weighted average rate of $1.30. The contracts, which protect Canada operations from currency fluctuations for U.S. dollar based purchases, do not qualify for hedge accounting. For the quarter and six months ended March 31, 2016, a fair value loss of $385 and $284 were recorded to Other liabilities and to Other income for the outstanding contracts, based on similar contract values (level 2 inputs). All contracts expire in 15 to 180 days.

NOTE 3 – ACQUISITIONS AND INVESTMENTS

On February 14, 2016, AMES Australia acquired substantially all of the Intellectual Property (IP) assets of Australia-based Nylex Plastics Pty Ltd. for approximately $1,700. Through this acquisition, AMES and Griffon secured the ownership of the trademark “Nylex” for certain categories of AMES products, principally in the country of Australia. Previously, the Nylex name was licensed. The acquisition of the Nylex IP was contemplated as a post-closing activity of the Cyclone acquisition and supports AMES' Australian watering products strategy. The purchase price was allocated to indefinite lived trademarks and is not deductible for income taxes.

In December 2015, Telephonics invested an additional $2,726 increasing its equity stake from 26% to 49% in Mahindra Telephonics Integrated Systems (MTIS), a joint venture with Mahindra Defence Systems, a Mahindra Group Company. MTIS is an aerospace and defense manufacturing and development facility in Prithla, India. This investment is accounted for using the equity method.

On April 16, 2015, AMES acquired the assets of an operational wood mill in Champion, PA from the Babcock Lumber Company for $2,225. The purchase price was preliminarily allocated to property, plant and equipment. The wood mill secures wood supplies, lowers overall production costs and mitigates risk associated with manufacturing handles for wheelbarrows and long-handled tools.

NOTE 4 – INVENTORIES

Inventories are stated at the lower of cost (first-in, first-out or average) or market.

The following table details the components of inventory:



	At March 31, 2016		At September 30, 2015
Raw materials and supplies	$	83,854	$	91,973
Work in process	66,862		70,811
Finished goods	160,851		163,025
Total	$	311,567	$	325,809

NOTE 5 – PROPERTY, PLANT AND EQUIPMENT

The following table details the components of property, plant and equipment, net:



	At March 31, 2016			At September 30, 2015
Land, building and building improvements	$	131,200		$	131,546
Machinery and equipment	782,300			747,194
Leasehold improvements	46,610			47,465
	960,110			926,205
Accumulated depreciation and amortization	(574,001		)	(546,233		)
Total	$	386,109		$	379,972

Depreciation and amortization expense for property, plant and equipment was $15,248 and $15,279 for the quarters ended March 31, 2016 and 2015, respectively, and $30,457 and $30,558 for the six months ended March 31, 2016 and 2015, respectively. Depreciation included in SG&A expenses was $3,250 and $3,262 for the quarters ended March 31, 2016 and 2015, respectively, and $6,408 and $6,432 for the six months ended March 31, 2016 and 2015, respectively. Remaining components of depreciation, attributable to manufacturing operations, are included in Cost of goods and services.

No event or indicator of impairment occurred during the six months ended March 31, 2016, which would require additional impairment testing of property, plant and equipment.

NOTE 6 – GOODWILL AND OTHER INTANGIBLES

The following table provides changes in the carrying value of goodwill by segment during the six months ended March 31, 2016:



	At September 30, 2015		Other adjustments including currency translations		At March 31, 2016
Home & Building Products	$	285,825	$	1,774	$	287,599
Telephonics	18,545		—		18,545
PPC	51,871		2,079		53,950
Total	$	356,241	$	3,853	$	360,094

The following table provides the gross carrying value and accumulated amortization for each major class of intangible assets:



	At March 31, 2016					At September 30, 2015
	Gross Carrying Amount		Accumulated Amortization		Average Life (Years)	Gross Carrying Amount		Accumulated Amortization
Customer relationships	$	171,123	$	43,882	25	$	168,560	$	39,755
Unpatented technology	6,195		3,864		12.5	6,107		3,525
Total amortizable intangible assets	177,318		47,746			174,667		43,280
Trademarks	85,161		—			82,450		—
Total intangible assets	$	262,479	$	47,746		$	257,117	$	43,280

Amortization expense for intangible assets was $1,870 and $1,914 for the quarters ended March 31, 2016 and 2015, respectively and $3,745 and $3,895 for the six months ended March 31, 2016 and 2015, respectively.

No event or indicator of impairment occurred during the six months ended March 31, 2016 which would require impairment testing of long-lived intangible assets including goodwill.

NOTE 7 – INCOME TAXES

In both the quarter and six months ended March 31, 2016 and 2015, the Company reported pretax income, and recognized tax provisions of 38.0% and 36.6% for the quarter and six months ended March 31, 2016, respectively, compared to 37.5% and 37.7%, respectively, in the comparable prior year periods.

The six months ended March 31, 2016 included a $356 discrete tax benefit primarily resulting from the retroactive extension of the federal R&D credit signed into law December 18, 2015. The current quarter ended March 31, 2016 included a de minimis discrete tax provision. The comparable prior year second quarter and six months ended March 31, 2015 included discrete tax provisions of $145 and $494, respectively, primarily resulting from taxes on repatriation of foreign earnings, partially offset by the benefit of the retroactive extension of the federal R&D credit signed into law December 19, 2014 and release of a valuation allowance. Excluding discrete items, the effective tax rates for the quarter and six months ended March 31, 2016 were 37.6% and 38.2%, respectively, compared to 35.7% and 35.2%, respectively, in the comparable prior year periods.

NOTE 8 – LONG-TERM DEBT



		At March 31, 2016														At September 30, 2015
		Outstanding Balance			Original Issuer Discount			Capitalized Fees & Expenses			Balance Sheet			Coupon Interest Rate (1)		Outstanding Balance			Original Issuer Discount			Capitalized Fees & Expenses			Balance Sheet			Coupon Interest Rate (1)
Senior notes due 2022	(a)	$	600,000		$	—		$	(7,620	)	$	592,380		5.25	%	$	600,000		$	—		$	(8,264	)	$	591,736		5.25	%
Revolver due 2021	(b)	122,500			—			(2,699		)	119,801			n/a		35,000			—			(2,049		)	32,951			n/a
Convert. debt due 2017	(c)	100,000			(3,468		)	(369		)	96,163			4.00	%	100,000			(5,594		)	(571		)	93,835			4.00	%
Real estate mortgages	(d)	39,204			—			(648		)	38,556			n/a		32,280			—			(470		)	31,810			n/a
ESOP Loans	(e)	35,643			—			(189		)	35,454			n/a		36,744			—			(224		)	36,520			n/a
Capital lease - real estate	(f)	6,993			—			(143		)	6,850			5.00	%	7,524			—			(156		)	7,368			5.00	%
Non U.S. lines of credit	(g)	11,465			—			(9		)	11,456			n/a		8,934			—			(3		)	8,931			n/a
Non U.S. term loans	(g)	37,681			—			(243		)	37,438			n/a		39,142			—			(299		)	38,843			n/a
Other long term debt	(h)	3,706			—			(24		)	3,682			n/a		1,575			—			—			1,575			n/a
Totals		957,192			(3,468		)	(11,944		)	941,780					861,199			(5,594		)	(12,036		)	843,569
less: Current portion		(19,217		)	—			—			(19,217		)			(16,593		)	—			—			(16,593		)
Long-term debt		$	937,975		$	(3,468	)	$	(11,944	)	$	922,563				$	844,606		$	(5,594	)	$	(12,036	)	$	826,976



		Three Months Ended March 31, 2016												Three Months Ended March 31, 2015
		Effective Interest Rate (1)		Cash Interest			Amort. Debt Discount		Amort. Debt Issuance Costs & Other Fees		Total Interest Expense			Effective Interest Rate (1)		Cash Interest			Amort. Debt Discount		Amort. Debt Issuance Costs & Other Fees		Total Interest Expense
Senior notes due 2022	(a)	5.5	%	7,875			—		323		8,198			5.5%		7,875			—		322		8,197
Revolver due 2021	(b)	n/a		954			—		122		1,076			n/a		659			—		133		792
Convert. debt due 2017	(c)	9.2	%	1,000			1,079		111		2,190			9.1	%	1,000			990		110		2,100
Real estate mortgages	(d)	2.2	%	154			—		17		171			3.8	%	116			—		36		152
ESOP Loans	(e)	3.3	%	275			—		17		292			2.9	%	254			—		18		272
Capital lease - real estate	(f)	5.4	%	90			—		7		97			5.3	%	102			—		6		108
Non U.S. lines of credit	(g)	n/a		97			—		22		119			n/a		109			—		—		109
Non U.S. term loans	(g)	n/a		272			—		13		285			n/a		337			—		14		351
Other long term debt	(h)	n/a		79			—		—		79			n/a		22			—		2		24
Capitalized interest				(118		)	—		3		(115		)			(93		)	—		—		(93		)
Totals				$	10,678		$	1,079	$	635	$	12,392				$	10,381		$	990	$	641	$	12,012

(1) n/a = not applicable



		Six Months Ended March 31, 2016												Six Months Ended March 31, 2015
		Effective Interest Rate (1)		Cash Interest			Amort. Debt Discount		Amort. Debt Issuance Costs & Other Fees		Total Interest Expense			Effective Interest Rate (1)		Cash Interest			Amort. Debt Discount		Amort. Debt Issuance Costs & Other Fees		Total Interest Expense
Senior notes due 2022	(a)	5.5	%	15,750			—		645		16,395			5.5	%	15,750			—		644		16,394
Revolver due 2021	(b)	n/a		1,525			—		237		1,762			n/a		997			—		291		1,288
Convert. debt due 2017	(c)	9.0	%	2,000			2,127		222		4,349			9.2	%	2,000			1,952		221		4,173
Real estate mortgages	(d)	2.1	%	305			—		29		334			3.8	%	240			—		72		312
ESOP Loans	(e)	3.1	%	531			—		35		566			2.9	%	514			—		35		549
Capital lease - real estate	(f)	5.4	%	183			—		13		196			5.3	%	208			—		12		220
Non U.S. lines of credit	(g)	n/a		356			—		46		402			n/a		250			—		—		250
Non U.S. term loans	(g)	n/a		556			—		26		582			n/a		725			—		30		755
Other long term debt	(h)	n/a		98			—		—		98			n/a		53			—		8		61
Capitalized interest				(274		)	—		5		(269		)			(236		)	—		—		(236		)
Totals				$	21,030		$	2,127	$	1,258	$	24,415				$	20,501		$	1,952	$	1,313	$	23,766

(a)

On February 27, 2014, in an unregistered offering through a private placement under Rule 144A, Griffon issued, at par, $600,000 of 5.25% Senior Notes due 2022 (“Senior Notes”); interest is payable semi-annually on March 1 and September 1. Proceeds from the Senior Notes were used to redeem $550,000 of 7.125% senior notes due 2018, to pay a call and tender offer premium of $31,530 and to make interest payments of $16,716, with the balance used to pay a portion of the related transaction fees and expenses. In connection with the issuance of the Senior Notes, all obligations under the $550,000 of 7.125% senior notes due 2018 were discharged.

The Senior Notes are senior unsecured obligations of Griffon guaranteed by certain domestic subsidiaries, and subject to certain covenants, limitations and restrictions. On June 18, 2014, Griffon exchanged all of the Senior Notes for substantially identical Senior Notes registered under the Securities Act of 1933 via an exchange offer. The fair value of the Senior Notes approximated $588,000 on March 31, 2016 based upon quoted market prices (level 1 inputs).

In connection with these transactions, Griffon capitalized $10,313 of underwriting fees and other expenses incurred related to the issuance and exchange of the Senior Notes, which will amortize over the term of such notes. Griffon recognized a loss on the early extinguishment of debt on the 7.125% senior notes aggregating $38,890, comprised of the $31,530 tender offer premium, the write-off of $6,574 of remaining deferred financing fees and $786 of prepaid interest on defeased notes.

(b)

On March 22, 2016, Griffon amended its Revolving Credit Facility (the “Credit Agreement”) to increase the maximum borrowing availability from $250,000 to $350,000, extend its maturity date from March 13, 2020 to March 22, 2021 and modify certain other provisions of the facility. The facility includes a letter of credit sub-facility with a limit of $50,000 and a multi-currency sub-facility of $50,000. The Credit Agreement provides for same day borrowings of base rate loans in lieu of a swing line sub-facility. Borrowings under the Credit Agreement may be repaid and re-borrowed at any time, subject to final maturity of the facility or the occurrence or event of default under the Credit Agreement. Interest is payable on borrowings at either a LIBOR or base rate benchmark rate, in each case without a floor, plus an applicable margin, which adjusts based on financial performance. Current margins are 1.25% for base rate loans and 2.25% for LIBOR loans. The Credit Agreement has certain financial maintenance tests including a maximum total leverage ratio, a maximum senior secured leverage ratio and a minimum interest coverage ratio, as well as customary affirmative and negative covenants, and events of default. The negative covenants place limits on Griffon's ability to, among other things, incur indebtedness, incur liens, and make restricted payments and investments. Borrowings under the Credit Agreement are guaranteed by Griffon’s material domestic subsidiaries and are secured, on a first priority basis, by substantially all domestic assets of the Company and the guarantors, and a pledge of not greater than 65% of the equity interest in Griffon’s material, first-tier foreign subsidiaries (except that a lien on the assets of Griffon's material domestic subsidiaries securing a limited amount of the debt under the credit agreement relating to Griffon's Employee Stock Ownership Plan ("ESOP") ranks pari passu with the lien granted on such assets under the Credit Agreement; see footnote (e) below). At March 31, 2016, outstanding borrowings and standby letters of credit were $122,500 and $15,922, respectively, under the Credit Agreement; $211,578 was available, subject to certain loan covenants, for borrowing at that date.

(c)

On December 21, 2009, Griffon issued $100,000 principal of 4% convertible subordinated notes due 2017 (the “2017 Notes”). The current conversion rate of the 2017 Notes is 70.1631 shares of Griffon’s common stock per $1 principal amount of notes, corresponding to a conversion price of $14.25 per share. Prior to July 15, 2016, if for at least 20 trading days out of the last 30 trading days during any fiscal quarter the closing price of Griffon's common stock is 130% or greater than the conversion price on each such trading day, then at any time during the immediately subsequent fiscal quarter any holder has the option to convert such holder's note (and the Company is required to notify the trustee under the notes, and the holders of the notes, that this condition to conversion has been met). At any time on or after July 15, 2016, any holder has the option to convert such holder's notes; Griffon has the right to settle the conversion of the 2017 Notes in cash, stock or a combination of cash and stock. Griffon has the intent and ability to settle the principal components of any conversion of notes in cash. When a cash dividend is declared that would result in an adjustment to the conversion ratio of less than 1%, any adjustment to the conversion ratio is deferred until the first to occur of (i) actual conversion; (ii) the 42nd trading day prior to maturity of the notes; and (iii) such time as the cumulative adjustment equals or exceeds 1%. At both March 31, 2016 and 2015, the 2017 Notes had a capital in excess of par component, net of tax, of $15,720. The fair value of the 2017 Notes approximated $115,375 on March 31, 2016 based upon quoted market prices (level 1 inputs). These notes are classified as long term debt as Griffon has the intent and ability to refinance the principal amount of the notes, including with borrowings under the Credit Agreement.

(d)

In September 2015 and March 2016, Griffon entered into mortgage loans in the amounts of $32,280 and $8,000, respectively. The mortgage loans are secured by four properties occupied by Griffon's subsidiaries. The loans mature in September 2025 and April 2018, respectively, are collateralized by the specific properties financed and are guaranteed by Griffon. The loans bear interest at a rate of LIBOR plus 1.50%. At March 31, 2016, $38,556 was outstanding, net of issuance costs.

(e)

In December 2013, Griffon’s ESOP entered into an agreement that refinanced the two existing ESOP loans into one new Term Loan in the amount of $21,098 (the "Agreement"). The Agreement also provided for a Line Note with $10,000 available to purchase shares of Griffon common stock in the open market. In July 2014, Griffon's ESOP entered into an amendment to the existing Agreement which provided an additional $10,000 Line Note available to purchase shares in the open market. During 2014, the Line Notes were combined with the Term Loan to form one new Term Loan. The Term Loan bears interest at LIBOR plus 2.38% or the lender’s prime rate, at Griffon’s option. The Term Loan requires quarterly principal payments of $551, with a balloon payment of approximately $30,137 due at maturity on December 31, 2018. During 2014, 1,591,117 shares of Griffon common stock, for a total of $20,000 or $12.57 per share, were purchased with proceeds from the Line Notes. As of March 31, 2016, $35,454, net of issuance costs, was outstanding under the Term Loan. The Term Loan is secured by shares purchased with the proceeds of the loan and with a lien on a specific amount of Griffon assets (which lien ranks pari passu with the lien granted on such assets under the Credit Agreement) and is guaranteed by Griffon.


(f)	In October 2006, CBP entered into a capital lease totaling $14,290 for real estate in Troy, Ohio. The lease matures in 2022, bears interest at a fixed rate of 5.0%, is secured by a mortgage on the real estate and is guaranteed by Griffon. At March 31, 2016, $6,850 was outstanding, net of issuance costs.

(g)

In September 2015, Clopay Europe GmbH (“Clopay Europe”) entered into a EUR 5,000 ($5,678 as of March 31, 2016) revolving credit facility and EUR 15,000 term loan. The term loan is payable in twelve quarterly installments of EUR 1,250, bears interest at a fixed rate of 2.5% and matures in September 2018. The revolving facility matures in September 2016, but is renewable upon mutual agreement with the bank. The revolving credit facility accrues interest at EURIBOR plus 1.75% per annum (1.75% at March 31, 2016). The revolver and the term loan are both secured by substantially all of the assets of Clopay Europe and its subsidiaries. Griffon guarantees the revolving facility and term loan. The term loan has an outstanding balance of EUR 12,500 ($14,006 at March 31, 2016, net of issuance costs) and the revolver had no borrowings outstanding at March 31, 2016. Clopay Europe is required to maintain a certain minimum equity to assets ratio and is subject to a maximum debt leverage ratio (defined as the ratio of total debt to EBITDA).

Clopay do Brazil maintains lines of credit of R$12,800 ($3,597 as of March 31, 2016). Interest on borrowings accrues at a rate of Brazilian CDI plus 6.0% (20.13% at March 31, 2016). At March 31, 2016 there was approximately R$6,911($1,942 as of March 31, 2016) borrowed under the lines. PPC guarantees the loan and lines.

In November 2012, Garant G.P. (“Garant”) entered into a CAD $15,000 ($11,567 as of March 31, 2016) revolving credit facility. The facility accrues interest at LIBOR (USD) or the Bankers Acceptance Rate (CDN) plus 1.3% per annum (1.93% LIBOR USD and 2.16% Bankers Acceptance Rate CDN as of March 31, 2016). The revolving facility matures in October 2016. This facility is classified as long term debt as Griffon has the intent and ability to refinance the borrowings. Garant is required to maintain a certain minimum equity. At March 31, 2016, there was CAD $8,371 ($6,455 as of March 31, 2016) borrowed under the revolving credit facility with CAD $6,629 ($5,112 as of March 31, 2016) available for borrowing.

In December 2013 and May 2014, Griffon Australia Holdings Pty Ltd (formerly known as Northcote Holdings Australia Pty Ltd) entered into two unsecured term loans in the outstanding amounts of AUD 12,500 and AUD 20,000, respectively. The AUD 12,500 term loan requires quarterly interest payments with principal due upon maturity in December 2016. This loan is classified as long term debt as Griffon has the intent and ability to refinance the principal amount. The AUD 20,000 term loan requires quarterly principal payments of AUD 625, with a balloon payment due upon maturity in May 2017. The loans accrue interest at Bank Bill Swap Bid Rate “BBSY” plus 2.8% per annum (5.09% at March 31, 2016 for each loan). As of March 31, 2016, Griffon had an outstanding combined balance of AUD $30,555 ($23,432 as of March 31, 2016) on the term loans, net of issuance costs.

A subsidiary of Northcote Holdings Pty Ltd also maintains a line of credit of AUD 5,000 ($3,835 as of March 31, 2016), which accrues interest at BBSY plus 2.50% per annum (4.79% at March 31, 2016). At March 31, 2016, there were AUD 4,000 ($3,068 as of March 31, 2016) under the lines. The assets of a subsidiary of Northcote Holdings Pty Ltd secures the AUD 5,000 line of credit.


(h)	Other long-term debt primarily consists of a loan with the Pennsylvania Industrial Development Authority with the balance consisting of capital leases.

At March 31, 2016, Griffon and its subsidiaries were in compliance with the terms and covenants of all credit and loan agreements.

NOTE 9 — SHAREHOLDERS’ EQUITY

During 2016, the Company paid a quarterly cash dividend of $0.05 per share in each quarter, totaling $0.10 per share for the six months ended March 31, 2016. During 2015, the Company paid quarterly cash dividends of $0.04 per share, totaling $0.16 per share for the year. Dividends paid on allocated shares in the ESOP were used to pay down the ESOP loan and recorded as a reduction of debt service payments and compensation expense. A dividend payable was established for the holders of restricted shares; such dividends will be released upon vesting of the underlying restricted shares.

On May 4, 2016 the Board of Directors declared a quarterly cash dividend of $0.05 per share, payable on June 23, 2016 to shareholders of record as of the close of business on May 27, 2016.

Compensation expense for restricted stock is recognized ratably over the required service period based on the fair value of the grant, calculated as the number of shares granted multiplied by the stock price on the date of grant and, for performance shares, the likelihood of achieving the performance criteria. Compensation cost related to stock-based awards with graded vesting, generally over a period of three to four years, is recognized using the straight-line attribution method and recorded within SG&A expenses.

On January 29, 2016, shareholders approved the Griffon Corporation 2016 Equity Incentive Plan ("Incentive Plan") under which awards of performance shares, performance units, stock options, stock appreciation rights, restricted shares, restricted stock units, deferred shares and other stock-based awards may be granted. Options granted under the Incentive Plan may be either “incentive stock options” or nonqualified stock options, generally expire ten years after the date of grant and are granted at an exercise price of not less than 100% of the fair market value at the date of grant. The maximum number of shares of common stock available for award under the Incentive Plan is 2,350,000 (600,000 of which may be issued as incentive stock options), plus (i) any shares reserved for issuance under the 2011 Equity Incentive Plan as of the effective date of the Incentive Plan, and (ii) any shares underlying awards outstanding on such effective date under the 2011 Incentive Plan that are canceled or forfeited. As of March 31, 2016, 1,795,603 shares were available for grant.

All grants outstanding under former equity plans will continue under their terms; no additional awards will be granted under such plans.

During the first quarter of 2016, Griffon granted 372,243 shares of restricted stock, subject to certain performance conditions, with vesting periods of three years, with a total fair value of $6,425, or a weighted average fair value of $17.26 per share. During the second quarter of 2016, Griffon granted 677,461 shares of restricted stock consisting of 605,000 shares to two senior executives with a vesting period of four years and a two year post-vesting holding period, and 31,761 shares of restricted stock, subject to certain performance conditions, with a vesting period of three years and a fair value of $473, or a weighted average fair value of $14.90 per share. Griffon also granted 40,700 shares with a vesting period of three years and a fair value of $618, or a weighted average fair value of $15.18 per share. The grants issued to two senior executive are subject to the achievement of certain absolute and relative performance conditions relating to the price of Griffon’s common stock. So long as the minimum performance condition is attained, the amount of shares that can vest will range from 220,000 to 605,000. The total fair value of these restricted shares is approximately $4,247, or a weighted average fair value of $7.02.

For the quarters ended March 31, 2016 and 2015, stock based compensation expense totaled $2,489 and $2,795, respectively. For the six months ended March 31, 2016 and 2015, stock based compensation expense totaled $5,555 and $5,372, respectively.

During the quarter and six months ended March 31, 2016, 1,683 shares, with a market value of $25 or $14.85 per share, and 188,222 shares, with a market value of $3,577 or $19.00 per share, respectively, were withheld to settle employee taxes due to the vesting of restricted stock, and were added to treasury.

On each of March 20, 2015 and July 29, 2015, Griffon’s Board of Directors authorized the repurchase of up to $50,000 of Griffon’s outstanding common stock. Under these share repurchase programs, the Company may purchase shares in the open market, including pursuant to a 10b5-1 plan, or in privately negotiated transactions. During the quarter ended March 31, 2016, Griffon purchased 1,516,919 shares of common stock under both the March 2015 and July 2015 programs, for a total of $22,705 or $14.97 per share. During the six months ended March 31, 2016, Griffon purchased 1,949,338 shares of common stock under both the

March 2015 and July 2015 programs, for a total of $29,935 or $15.36 per share. As of March 31, 2016, $27,990 remains under the July 2015 Board authorization.

From August 2011 to March 31, 2016, Griffon repurchased 14,256,115 shares of common stock, for a total of $183,067 or $12.84 per share, under Board authorized repurchase programs.

In addition to repurchases under Board authorized programs, on December 10, 2013, Griffon repurchased 4,444,444 shares of its common stock for $50,000 from GS Direct, L.L.C. (“GS Direct”), an affiliate of The Goldman Sachs Group, Inc. Subject to certain exceptions, if GS Direct intends to sell its remaining 5,555,556 shares of Griffon common stock at any time prior to December 31, 2016, it will first negotiate in good faith to sell such shares to the Company.

NOTE 10 – EARNINGS PER SHARE (EPS)

Basic EPS (and diluted EPS in periods when a loss exists) was calculated by dividing income available to common shareholders by the weighted average number of shares of common stock outstanding during the period. Diluted EPS was calculated by dividing income available to common shareholders by the weighted average number of shares of common stock outstanding plus additional common shares that could be issued in connection with stock based compensation and upon the settlement of the 2017 Convertible notes. In the six months ended March 31, 2015 , the 2017 Notes were anti-dilutive due to the conversion price being greater than the average stock price during the periods presented.

The following table is a reconciliation of the share amounts (in thousands) used in computing earnings per share:



	Three Months Ended March 31,		Six Months Ended March 31,
	2016	2015	2016	2015
Weighted average shares outstanding - basic	41,426	45,349	41,697	45,829
Incremental shares from stock based compensation	2,059	1,874	2,135	1,853
Convertible debt due 2017	406	446	895	—

Weighted average shares outstanding - diluted	43,891	47,669	44,727	47,682

Anti-dilutive options excluded from diluted EPS computation	416	567	418	580

Griffon has the intent and ability to settle the principal amount of the 2017 Notes in cash, and as such, the potential issuance of shares related to the principal amount of the 2017 Notes does not affect diluted shares.

NOTE 11 – BUSINESS SEGMENTS

Griffon’s reportable segments are as follows:


•	HBP is a leading manufacturer and marketer of residential, commercial and industrial garage doors to professional dealers and major home center retail chains, as well as a global provider of non-powered landscaping products for homeowners and professionals.


•	Telephonics develops, designs and manufactures high-technology integrated information, communication and sensor system solutions for military and commercial markets worldwide.


•	PPC is an international leader in the development and production of embossed, laminated and printed specialty plastic films used in a variety of hygienic, health-care and industrial applications.

Information on Griffon’s reportable segments is as follows:



	For the Three Months Ended March 31,				For the Six Months Ended March 31,
REVENUE	2016		2015		2016		2015
Home & Building Products:
AMES	$	165,847	$	159,092	$	284,137	$	292,202
CBP	113,387		104,513		256,295		243,113
Home & Building Products	279,234		263,605		540,432		535,315
Telephonics	105,874		98,687		214,911		189,345
PPC	114,999		137,728		238,913		277,520
Total consolidated net sales	$	500,107	$	500,020	$	994,256	$	1,002,180

The following table reconciles segment operating profit to income before taxes:



	For the Three Months Ended March 31,						For the Six Months Ended March 31,
INCOME BEFORE TAXES	2016			2015			2016			2015
Segment operating profit:
Home & Building Products	$	17,810		$	8,651		$	38,969		$	25,020
Telephonics	7,875			9,114			15,688			16,631
PPC	5,880			9,867			11,897			17,887
Total segment operating profit	31,565			27,632			66,554			59,538
Net interest expense	(12,348		)	(11,857		)	(24,360		)	(23,494		)
Unallocated amounts	(9,379		)	(7,580		)	(19,007		)	(15,844		)
Income before taxes	$	9,838		$	8,195		$	23,187		$	20,200

Griffon evaluates performance and allocates resources based on each segment's operating results before interest income and expense, income taxes, depreciation and amortization, unallocated amounts (mainly corporate overhead), as applicable (“Segment adjusted EBITDA”). Griffon believes this information is useful to investors for the same reason.

The following table provides a reconciliation of Segment adjusted EBITDA to Income before taxes:



	For the Three Months Ended March 31,						For the Six Months Ended March 31,
	2016			2015			2016			2015
Segment adjusted EBITDA:
Home & Building Products	$	26,338		$	17,330		$	56,167		$	41,800
Telephonics	10,444			11,616			20,788			21,648
PPC	11,781			15,764			23,566			30,315
Total Segment adjusted EBITDA	48,563			44,710			100,521			93,763
Net interest expense	(12,348		)	(11,857		)	(24,360		)	(23,494		)
Segment depreciation and amortization	(16,998		)	(17,078		)	(33,967		)	(34,225		)
Unallocated amounts	(9,379		)	(7,580		)	(19,007		)	(15,844		)
Income before taxes	$	9,838		$	8,195		$	23,187		$	20,200

Unallocated amounts typically include general corporate expenses not attributable to a reportable segment.



	For the Three Months Ended March 31,				For the Six Months Ended March 31,
DEPRECIATION and AMORTIZATION	2016		2015		2016		2015
Segment:
Home & Building Products	$	8,528	$	8,679	$	17,198	$	16,780
Telephonics	2,569		2,502		5,100		5,017
PPC	5,901		5,897		11,669		12,428
Total segment depreciation and amortization	16,998		17,078		33,967		34,225
Corporate	120		115		235		228
Total consolidated depreciation and amortization	$	17,118	$	17,193	$	34,202	$	34,453

CAPITAL EXPENDITURES
Segment:
Home & Building Products	$	10,835	$	11,114	$	28,115	$	21,375
Telephonics	1,958		1,339		3,238		2,308
PPC	6,956		7,486		13,360		15,165
Total segment	19,749		19,939		44,713		38,848
Corporate	1,185		853		1,239		865
Total consolidated capital expenditures	$	20,934	$	20,792	$	45,952	$	39,713



ASSETS	At March 31, 2016		At September 30, 2015
Segment assets:
Home & Building Products	$	1,079,215	$	1,034,032
Telephonics	296,137		302,560
PPC	350,935		343,519
Total segment assets	1,726,287		1,680,111
Corporate	48,643		47,831
Total continuing assets	1,774,930		1,727,942
Assets of discontinued operations	3,584		3,491
Consolidated total	$	1,778,514	$	1,731,433

NOTE 12 – DEFINED BENEFIT PENSION EXPENSE

Defined benefit pension expense (income) was as follows:



	Three Months Ended March 31,						Six Months Ended March 31,
	2016			2015			2016			2015
Interest cost	$	2,080		$	2,207		$	4,160		$	4,414
Expected return on plan assets	(2,916		)	(2,932		)	(5,832		)	(5,864		)
Amortization:
Prior service cost	4			4			8			8
Recognized actuarial loss	591			541			1,181			1,082
Net periodic expense (income)	$	(241	)	$	(180	)	$	(483	)	$	(360	)

NOTE 13 – RECENT ACCOUNTING PRONOUNCEMENTS

In May 2014, the FASB issued guidance on revenue from contracts with customers. The underlying principle is that an entity will recognize revenue to depict the transfer of goods or services to customers at an amount that the entity expects to be entitled to in exchange for those goods or services. The guidance provides a five-step analysis of transactions to determine when and how revenue is recognized. Other major provisions include capitalization of certain contract costs, consideration of time value of money in the transaction price, and allowing estimates of variable consideration to be recognized before contingencies are resolved, in certain circumstances. The guidance also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity's contracts with customers. This guidance permits the use of either the retrospective or cumulative effect transition method and is effective for the Company beginning in 2019; early adoption is permitted beginning in 2018. We have not yet selected a transition method and are currently evaluating the impact of the guidance on the Company's financial condition, results of operations and related disclosures.

In August 2014, the FASB issued guidance on management's responsibility in evaluating whether there is substantial doubt about a company's ability to continue as a going concern and related footnote disclosures. Management will be required to evaluate, at each reporting period, whether there are conditions or events that raise substantial doubt about a company's ability to continue as a going concern within one year from the date the financial statements are issued. This guidance is effective prospectively for annual and interim reporting periods beginning in 2017; implementation of this guidance is not expected to have a material effect on the Company’s financial condition or results of operations.

In April 2015, the FASB issued guidance on simplifying the presentation of debt issuance costs. This guidance requires debt issuance costs on the balance sheet to be presented as a direct deduction from the carrying amount of a related debt liability, similar to debt discounts. The Company early adopted this guidance in March 2015 and applied it retrospectively for all periods presented in the financial statements. Adoption of this standard did not have a significant impact on the Company's consolidated financial statements.

In November 2015, the FASB issued guidance on simplifying the presentation of deferred income taxes, requiring deferred income tax liabilities and assets to be classified as non-current in the statement of financial position. This guidance may be applied retrospectively or prospectively to all annual and interim periods presented and is effective for the Company beginning in fiscal 2018; implementation of this guidance is not expected to have a material effect on the Company’s financial condition or results of operations.

In February 2016, the FASB issued guidance on lease accounting requiring lessees to recognize a right-of-use asset and a lease liability for long-term leases. The liability will be equal to the present value of lease payments. This guidance must be applied using a modified retrospective transition approach to all annual and interim periods presented and is effective for the company beginning in fiscal 2019. We are currently evaluating the impact of the guidance on the Company's financial condition, results of operations and related disclosures.

In March 2016, the FASB issued guidance on simplifying several aspects of accounting for share-based payment award transactions, including income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. This guidance requires a mix of prospective, modified retrospective, and retrospective transition to all annual and interim periods presented and is effective for the Company beginning in fiscal 2018. We are currently evaluating the impact of the guidance on the Company's financial condition, results of operations and related disclosures.

The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements, and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

NOTE 14 – DISCONTINUED OPERATIONS

The following amounts related to the Installation Services segment, discontinued in 2008, and other businesses discontinued several years ago, which have been segregated from Griffon’s continuing operations, and are reported as assets and liabilities of discontinued operations in the condensed consolidated balance sheets:



	At March 31, 2016		At September 30, 2015
Assets of discontinued operations:
Prepaid and other current assets	$	1,325	$	1,316
Other long-term assets	2,259		2,175
Total assets of discontinued operations	$	3,584	$	3,491

Liabilities of discontinued operations:
Accrued liabilities, current	$	1,924	$	2,229
Other long-term liabilities	3,220		3,379
Total liabilities of discontinued operations	$	5,144	$	5,608

There was no Installation Services revenue or income for the six months ended March 31, 2016 or 2015.

NOTE 15 – OTHER EXPENSE

For the quarters ended March 31, 2016 and 2015, Other income (expense) included $322 and $985, respectively, of net currency exchange losses in connection with the translation of receivables and payables denominated in currencies other than the functional currencies of Griffon and its subsidiaries as well as $10 and $517, respectively, of net investment income.

For the six months ended March 31, 2016 and 2015, Other income (expense) included $109 and $(1,525), respectively, of net currency exchange gains (losses) in connection with the translation of receivables and payables denominated in currencies other than the functional currencies of Griffon and its subsidiaries as well as $202 and $563, respectively, of net investment income.

NOTE 16 – WARRANTY LIABILITY

Telephonics offers warranties against product defects for periods generally ranging from one to two years, depending on the specific product and terms of the customer purchase agreement. Typical warranties require Telephonics to repair or replace the defective products during the warranty period at no cost to the customer. At the time revenue is recognized, Griffon records a liability for warranty costs, estimated based on historical experience, and periodically assesses its warranty obligations and adjusts the liability as necessary. AMES offers an express limited warranty for a period of ninety days on all products from the date of original purchase unless otherwise stated on the product or packaging.

Changes in Griffon’s warranty liability, included in Accrued liabilities, were as follows:



	Three Months Ended March 31,						Six Months Ended March 31,
	2016			2015			2016			2015
Balance, beginning of period	$	4,778		$	4,908		$	4,756		$	4,934
Warranties issued and changes in estimated pre-existing warranties	1,279			1,842			2,196			2,791
Actual warranty costs incurred	(872		)	(1,076		)	(1,767		)	(2,051		)
Balance, end of period	$	5,185		$	5,674		$	5,185		$	5,674

NOTE 17 – OTHER COMPREHENSIVE INCOME (LOSS)

The amounts recognized in other comprehensive income (loss) were as follows:



	Three Months Ended March 31, 2016									Three Months Ended March 31, 2015
	Pre-tax			Tax			Net of tax			Pre-tax			Tax			Net of tax
Foreign currency translation adjustments	$	13,683		$	—		$	13,683		$	(30,384	)	$	—		$	(30,384	)
Pension and other defined benefit plans	595			(209		)	386			545			(192		)	353
Cash flow hedges	(2,355		)	706			(1,649		)	(91		)	11			(80		)
Available-for-sale securities	—			—			—			145			(53		)	92
Total other comprehensive income (loss)	$	11,923		$	497		$	12,420		$	(29,785	)	$	(234	)	$	(30,019	)



	Six Months Ended March 31, 2016									Six Months Ended March 31, 2015
	Pre-tax			Tax			Net of tax			Pre-tax			Tax			Net of tax
Foreign currency translation adjustments	$	10,334		$	—		$	10,334		$	(45,884	)	$	—		$	(45,884	)
Pension and other defined benefit plans	1,189			(417		)	772			1,090			(384		)	706
Cash flow hedges	(3,805		)	1,141			(2,664		)	(204		)	50			(154		)
Available-for-sale securities	—			—			—			(1,370		)	500			(870		)
Total other comprehensive income (loss)	$	7,718		$	724		$	8,442		$	(46,368	)	$	166		$	(46,202	)

The components of Accumulated other comprehensive income (loss) are as follows:



	March 31, 2016			September 30, 2015
Foreign currency translation adjustments	$	(49,844	)	$	(60,178	)
Pension and other defined benefit plans	(30,921		)	(31,692		)
Change in Cash flow hedges	(1,981		)	682
	$	(82,746	)	$	(91,188	)

Amounts reclassified from accumulated other comprehensive income (loss) to income were as follows:



	For the Three Months Ended March 31,						For the Six Months Ended March 31,
Gain (Loss)	2016			2015			2016			2015
Pension amortization	$	(595	)	$	(545	)	$	(1,189	)	$	(1,090	)
Cash flow hedges	684			110			1,089			197
Available-for-sale securities	—			489			—			489
Total gain (loss)	89			54			(100		)	(404		)
Tax benefit (expense)	(3		)	(20		)	77			146
Total	$